NO JOKE -- New Real Estate Laws and Issues

On Thursday, December 20th, President Bush signed into law a bill passed by Congress: HR 3648 –Mortgage Forgiveness Debt Relief Act of 2007.
The three major points are:
· Elimination of the “phantom tax” on foreclosures, short sales or other discharges of debt on a primary residence. Consider this scenario: A property is worth $250,000, and the mortgage balance is $300,000. Under the old rules, if a lender forgave the $50k difference as part of a foreclosure, short sale, refinance or loan modification, the borrower had to claim the $50k as income and pay federal income taxes on that amount. The new law eliminates this “phantom tax”, and the forgiven debt is no longer treated as taxable income to the borrower as long as certain requirements are met, such as the discharged mortgage balance must be on the taxpayer’s principal residence.
· The tax deduction for mortgage insurance premiums is now extended until December 31, 2010 instead of expiring at the end of 2007. The same rules apply as before in terms of the income limitations etc.
Those with adjusted gross incomes up to $100,000 receive the full break, but the deduction reduces 10% for every $1,000 over $100,000 until it reaches zero at an adjusted gross income of $110,000.
· The capital gains exclusion is now $500,000 instead of $250,000 for an unmarried individual who sells their primary residence within 2 years of the time their spouse has died. This new guideline applies to sales after December 31, 2007, and provides relief for widows and widowers by giving them a 2 year window from the time their spouse has died to sell their home and receive the $500,000 exclusion. Of course, the same rules apply as before, where the individual(s) need to have lived in the home as their primary residence for 2 out of the last 5 years.
Yet to be determined…
On October 17, 2007 the Office of the Attorney General amended 940 CMR 8.00
et. seq., the regulation under the Consumer Protection Act that identifies unfair and
deceptive acts or practices in connection with mortgage brokering and mortgage lending.
The new amended regulations were issued following an extensive comment period and
after four hearings were held statewide between September 18 and 21, 2007. The new
regulations will take effect on January 2, 2008.
Massachusetts’ Attorney General Martha Coakley’s new mortgage regulations have forced national lenders like Wells Fargo to drastically adjust their business practices in the Bay State — which includes no longer paying yield spread premium to its brokers. Who else is dismissing YSP and which lender is pulling the plug on business in the state altogether?
Massachusetts prohibits certain activities and requires that all mortgage loans be in the borrower's best interests. Furthermore, a mortgage loan broker's interest cannot conflict with the borrower's best interest.